Members of the Federal Reserve’s Open Market Committee will meet on Wednesday (March 21), which will help boost gold prices in 2018…
Plus, gold prices have been showing a consistently bullish pattern over the last year, which means a new catalyst cou…

The story of Bitcoin has been told, repeatedly, as a story of an asset that offers a hedge to stocks, a hedge against the fiat currencies and a hedge against the excesses of QE. That story is pure, unadulterated bullshit.As the chart above shows, Bitco…

The geopolitical and market bogeymen of the moment – Kim Jong Un, Vladimir Putin, tariffs, cyber warfare – are riding tall in the saddle.
That’s sparked something of a “flight to safety,” which ignited a bit of an uptick in demand for Treasuries this …

If targeting political extremes generates the most profit, then that’s what these corporations will pursue.As many of you know, oftwominds.com was falsely labeled propaganda by the propaganda operation known as ProporNot back in 201…

This weekend, I’d like to take a slightly nostalgic trip down Memory Lane, into the dark, swirling menacing pool that was the dawn of the Internet. OK, that sentence didn’t end up quite where I meant it to.

When I started my newsletter business in October of 2000, I decided to have a little fun with it on this new thing called the World Wide Web, aka “the internet.” If you, like me, are of a certain age, you remember well that we started every web address with the ubiquitous www.

WSJ: “Ten Years After the Bear Stearns Bailout, Nobody Thinks It Would Happen Again.” Myriad changes to the financial structure have seemingly safeguarded the financial system from another 2008-style crisis. The big Wall Street financial institutions…

Well, a potentially very profitable twist on that equation is playing out right now in the silver market. Mined silver supplies have been drying up over the past few years, while silver prices have climbed 20% in the same time frame.

But the exciting opportunity for investors is that precious metals, like silver, are among the only assets that can see higher demand when prices rise. It’s just not what normally happens in “regular” markets.

But, to be fair, silver (and gold) are anything but normal markets.

Liquidity moves markets!

Silver supplies risk falling short of demand for some time to come. In mid-December 2017, I said silver would likely tack on steady double-digit gains before entering a “Tulip Mania”-style profit frenzy.

I think these charts confirm my suspicions. It’s likely we’re in the early innings of spiraling silver prices as more and more investors decide they simply can’t let this bull leave them behind…

Silver Production Won’t Ever Be as High Again

2015 may well have marked a long-term peak in global silver production. That’s when the world’s mines produced 893 million ounces.

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The following year, 2016, saw the first drop in a decade, with output falling to 887 million ounces.

2017 was no better, with production falling another 30 million ounces, to just 857 million ounces.

Forecasts point to a very small increase of 867 million ounces in 2018, up only 1% over the 2017 haul.

But… there’s a very big “if” attached to that small increase.

You see, some of the market’s most significant silver producers face considerable obstacles all over the world.

Tahoe Resources Inc.‘s (NYSE: TAHO) Escobal Mine in Guatemala has shut down due to a suspended mining license, while workers at Hecla Mining Co.‘s (NYSE: HL) Lucky Friday Mine near Mullan, Idaho, have been on strike since March 2017.

So, if these mines can get back to producing, that will help boost silver output this year… but it’s not quite that simple.

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Here’s why…

Silver Mining Is a Tough Game… and Getting Tougher

According to recent research by SRSrocco Report, two of the world’s largest primary silver mines have been facing some very stiff headwinds.

The troubles come mainly in the form of falling ore grades, expressed in ounces of silver per ton of ore mined, combined with rising production costs.

At Fresnillo Plc.‘s Fresnillo mine, in Zacatecas, Mexico, 2010 silver production stood at 35.9 million ounces. The ore grade: 14.1 ounces per ton.

By 2015, it had fallen to less than half the 2010 haul. That year, output was 15.6 million ounces, at an average ore grade of 6.5 ounces per ton.

That means they had to mine more than twice as much rock to get at less than half as much silver. Not a great scenario, though in the last two years output is up slightly, and the yield in ounces per ton has also improved marginally.

Global Industry Will Drive Demand Like Never Before

Physical silver demand has retreated in the last couple of years, but I don’t think that’s going to last.

Investors bought less silver coins and bars last year, I believe mostly due to the attraction of rapidly rising stocks and Bitcoin as alternatives.

Bitcoin has already been chopped in half from its $20,000 peak, and stocks have begun to fall apart over the past week or so, as indexes slid into “correction” territory.

There may yet be some gains there, but the bull’s getting long in the tooth. In any case, as I’ll show you, investors are likely to make a renewed flight to the safety that precious metals offer.

Jewelry demand was up slightly in 2017, with slower Chinese buying partially offset by stronger Indian and North American demand.

But industrial demand surged 3%, mostly due to rapidly expanding production in the solar industry.

I think the industrial sector will help drive stronger demand for silver in the next couple of years, as solar panels, automotive, and electronics continue to see strong gains.

Meanwhile, HSBC Bank has said it sees a potential for investors to seek protection in silver. James Steel, chief precious metals analyst for HSBC, said, “Any resurgence in risk may spark ‘safe-haven’ demand and aid prices.” Steel also noted, “Tighter supply/demand balances are an important factor in our outlook.”

Here’s How You Can Profit on Scarce, Expensive Silver

So here’s one of the best ways you can play the inevitability of peak silver, coupled with rising demand.

The ETF has over $400 million in assets spread globally across 27 silver mining companies. Of those we do find both Tahoe Resources and Hecla Mining, both of which could see their silver output challenged until outstanding issues are resolved. But together, they only represent about 8% of the allocation, so I’m not overly concerned about their impact.

Geographical allocation is nicely balanced. It works out to 39.07% in Canada, 17.72% in Mexico, 12.89% in Russia, 12.52% in United States, 11.61% in South Korea, and 6.19% in Peru.

It’s true that silver producers will find they have a challenging environment in which to grow their output as grades continue to deteriorate. However, this is the mining sector: I expect many will end up doing deals to take over smaller players in the exploration and/or development stages in order to grow production.

The bottom line: Silver is in a massive bull market, and important production challenges will only add to the metal’s irresistible attractiveness and price gains in 2018.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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